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Changes to Industrial Property Assessments
On June 26, 2026, the Minister of Municipal Affairs issued a Ministerial Order approving a new regulation under the Municipal Government Act (the MGA) which impacts the assessment of linear property and machinery and equipment in Alberta – the Matters Relating to Regulated Industrial Assessment Regulation, Alta Reg 174/2026(MRRIA). This new regulation will come into force on January 1, 2027, and will apply to the 2026 assessment year.
The most significant changes found in MRRIA pertain to how “included costs” are determined for assessments of linear property and machinery and equipment. “Included costs” refer to the actual construction costs that are included in determining a property’s initial assessed value, before base year modifiers and depreciation are applied under the applicable Minister’s Guidelines. These changes are intended to increase stability, predictability and certainty in the preparation of assessments of machinery and equipment and linear property by more clearly defining what construction costs are included and excluded from those assessments.
Since 2005, “included costs” for linear property and machinery and equipment assessments were determined in accordance with the Construction Cost Reporting Guide (CCRG). As a starting point, the CCRG requires “the actual expenditures made in constructing the facility as referenced in the agreement with the contractor or as incurred directly by the company” to be used for determining the “included costs” for machinery and equipment and linear property assessments (section 1.000). This includes both “direct costs” (meaning “costs for labour, materials, and installation costs” related to the facility’s construction), and “indirect costs” (meaning “costs incurred away from the site or are costs allocated to the project” – see section 1.100).
Under MRRIA, assessments of machinery and equipment and linear property will continue to be based on their actual construction costs, including both direct and indirect costs. The definitions of “direct costs” and “indirect costs” have been updated to increase clarity on what costs are included under each of these categories (see ss. 1(e), 1(g)).
The CCRG then prescribes categories of construction costs that are to be excluded from the assessment – these include, for example: feasibility studies, commissioning charges, pre-production runs and start-up costs, consumable materials, non-assessable property, design changes and alterations, interference costs, and GST (see sections 2.200 and 2.300). The CCRG also confirms that “abnormal” construction costs are excluded, which are costs that are “greater than typical construction costs”, which includes costs arising from delays in construction caused by natural disasters, inclement weather, or where required labour is available on site but a lack of supplies or a work slowdown reduces or stops construction (section 2.500).
The CCRG’s broad definition of “abnormal costs” has caused uncertainty in its application, particularly on how to determine “typical” versus “abnormal” construction costs. This has led to significant litigation before the Land and Property Rights Tribunal (LPRT).
For example, in Fort Hills Energy Corp. v. Provincial Assessor, 2024 ABLPRT 149, the LPRT determined that the difference between construction costs in remote areas of the Province, as compared to construction costs in the Edmonton area, should be considered “abnormal costs” excluded from the assessment, because construction costs in the Edmonton-area are considered “typical”, and any additional costs associated with construction in other areas would be considered “abnormal.” This LPRT decision is under judicial review, and the Court has not yet issued a decision.
MRRIA simplifies and clarifies the framework for determining what costs are excluded from the assessment. MRRIA accomplishes this by replacing the CCRG’s broad definition of “abnormal costs” with an exhaustive list of costs that are to be excluded from the assessment. Many of these categories of excluded costs are carried forward from the CCRG, but others are different.
Most critically, there is no longer any broad reference to “abnormal costs” being excluded from the assessment – instead, certain prescribed categories of excluded costs that would previously have fallen under the broad definition of “abnormal costs” in the CCRG are now listed as excluded costs in MRRIA, including:
- Construction costs incurred for an alteration or modification made to an improvement during or after commissioning, including changes to address capacity limitations or improve operational efficiency, where no new improvement is installed as part of the alteration or modification (s. 10(1)(e));
- Extraordinary site-specific costs incurred as a result of external events beyond the reasonable control of the contractor or assessed person that delay the construction, such as natural disasters, government-ordered work stoppages or similar events, but only where the costs are not directly related to construction and only to the extent that the costs are directly quantified (s. 10(1)(q));
- Site-specific costs incurred before or during commissioning to address the repair or replacement of a previously installed material, component, equipment or machinery that was damaged or impaired, but only to the extent that the costs are directly quantified (s. 10(1)(r)); and
- Costs incurred to provide temporary protective measures intended to maintain uninterrupted operation and structural safety of existing improvements during construction that is in close proximity to the active or existing operations or improvements, including additional labour and temporary materials (s. 10(1)(s)).
Further, MRRIA requires the included costs to be adjusted in accordance with a regional labour factor as determined in the applicable Minister’s Guidelines (s. 9(3)). This regional labour factor replaces the “Edmonton-area adjustment” framework that had been approved by the LPRT in the Fort Hills decision.
Section 10(2) of MRRIA clarifies certain categories of costs that are not excluded from assessment (and which previously were either considered excluded costs under the CCRG, or there was uncertainty on whether they were considered excluded costs). These include:
- Costs incurred or attributed during pre-construction activities relating to the development of working models used to facilitate or support construction, such as costs relating to the development of the design of an improvement that was constructed, and costs of staff training (s. 10(2)(a));
- Costs to complete or add an improvement during or as a result of post-construction activities (s. 10(2)(b));
- Costs associated with constructing a new improvement around an existing improvement (s. 10(2)(c));
- Costs to ensure the continuity of operations, safety requirements continue to be met, or a facility complies with relevant building codes and other regulatory requirements (s. 10(2)(d));
- Costs to begin the construction of an improvement that is intended for use for a future expansion or improvement (s. 10(2)(e));
- Costs related to the access and use of computer hardware and software that is necessary and integral to the operation of an improvement and without which the improvement cannot reasonably function as intended (s. 10(2)(f)); and
- Costs related to engineering, design, materials or components that exceed the standard functional requirements or regulatory minimums necessary to operate an improvement (s. 10(2)(g)).
This new framework for determining the initial assessment of machinery and equipment and linear property will only apply to new assessments of machinery and equipment and linear property prepared in 2027 (2026AY) and subsequent taxation years (s. 11). This means that existing assessments of machinery and equipment and linear property that were prepared under the CCRG will be carried forward for future assessment years.
Overall, this updated framework for determining which construction costs are included and excluded from assessments of machinery and equipment and linear property should increase stability and predictability in preparing those assessments, which should help avoid lengthy LPRT hearings on this subject in the future. It is unclear if this new framework will result in higher or lower assessments for machinery and equipment and linear property as compared to assessments prepared under the CCRG – although it is likely that this will vary from property to property. Municipalities should speak with their municipal assessors and the Provincial Assessor if they have specific questions about how and if this new framework will impact industrial assessments within their borders.
This post is meant to provide information only and is not intended to provide legal advice. Although every effort has been made to provide current and accurate information, changes to the law may cause the information in this post to be outdated.
